An Aggressive Telecom Investor Looks East and West for Quarry

VICTORIA SHANNON

Monday

May 28, 2007 at 5:38 AM

Altimo wants to expand by buying phone assets in Asia and Western Europe.

PARIS, May 27 — Though far from a household name in telecommunications, Altimo likes to compare its aspirations to Vodafone, the world’s largest cellphone network, which owns pieces of phone companies from the East Coast to England to India.

Altimo, essentially a telecommunications investment firm, already owns stakes in several phone companies in and around its home base, Moscow. Now it wants to expand both east and west, by buying phone assets in Asia and Western Europe.

But the problem Altimo faces, some analysts say, is that at this point, it has made few allies in its quest. Where it is known beyond Russia, it is for its propensity to fight tenaciously in court and on corporate boards for its ambitions.

Altimo has battled the Northern European phone companies TeliaSonera and Telenor over joint investments. Now it is considering discussions with communications providers in Indonesia and Vietnam before getting serious about Europe.

Altimo’s chief financial officer, Teijo Pankko, said that the company’s reputation for aggressiveness was not undeserved, but that this did not make Altimo — a subsidiary of the Alfa Group, a conglomerate controlled by the Russian billionaire Mikhail Fridman — a bad partner.

“Obviously, we are not looking for conflict,” Mr. Pankko said. “At the same time, being very much hands-on in our investment strategy, we normally get into a situation where the investment is under some kind of constraint. We are strategic managers, working on behalf of all minority shareholders.”

In the battle for control of VimpelCom, Telenor, of Norway, made the latest move, spending $745 million this month to increase its stake to 29.9 percent, compared with Altimo’s 42.4 percent. TeliaSonera, a big Nordic phone company created in 2002 from the former phone monopolies of Sweden and Finland, has been blocked from augmenting its control of Megafon and Turkcell by Altimo and the Turkish holding company Cukurova. At the same time, Altimo is challenging Cukurova over terms of a $1.4 billion debt repayment and Telenor over an audit of Kyivstar.

A private company, Altimo says it has assets worth $20 billion, up from $9 billion in a recent 18-month period. Mr. Pankko said Altimo’s return on investment in the period, through the end of March, was 60 percent. Good money can still be made in the industry, the company maintains, despite the slowdown in sales of handsets in many Western markets.

“Even in times of recession, I can’t imagine there would be a dramatic drop-off in cash flow at these companies,” Mr. Pankko said. “We believe we are one of the few investors who look at the market with confidence.”

Despite a backlash against mobile charges that resulted in the approval of price limits by the European Parliament last week, Mr. Pankko predicted that people would spend more on telecommunications. Besides calls with handsets, he said, they will increasingly use them for Internet and e-mail messages, which are more costly for consumers and more profitable for carriers.

As an investor, Altimo must surmount another potential handicap — the reputation of Russian big business for operating outside the law. Mr. Pankko dismissed concerns about corruption, saying that even though it is a private company, Altimo’s books are audited each year by PricewaterhouseCoopers.

It is also appointing prominent figures to its advisory board, include Kurt Hellstrom, a former chief executive of Ericsson; Julian Horn-Smith, a former deputy chief executive of Vodafone; and Douglas Hurd, a former British foreign secretary.

“Our goal is to be in every sense a Western-run company,” Mr. Pankko said, with a near-term goal of listing its stock on a public exchange. “We are forcing ourselves. We are putting ourselves in this hard place. It’s important that they see us transparently.”

Mr. Pankko said that his company expected to find a partner in Asia.

“In Indonesia, we have not made any kind of decision on which company or how we are going to invest,” he said. “But P. T. Indosat is one of the obvious candidates. We are talking to them, we are talking to the government. We are very willingly discussing our intentions.”

In Europe, though, many telecommunication companies on the Continent lack the geographic scale that Altimo seeks. “But there are obvious alternatives — two of them are Telenor and TeliaSonera,” Mr. Pankko said. In particular, Altimo has said that it would like to acquire TeliaSonera stakes as the Swedish government spins off its holdings.

As for how it settles its differences with those rivals and other shareholders, Mr. Pankko said, “We are ambitious, but we are rational, which means we are always open to negotiation.”

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